Features

By Joseph Lowry The supply/demand imbalance for institutional-quality retail real estate in the Northeast continues to exist, with hundreds of millions of dollars of capital chasing an extremely limited number of acquisition opportunities. For landlord-focused retail real estate services specialists, this is fueling a notable increase in advisory activity for both the broker-listed shopping centers, as well as for off-market shopping center acquisition opportunities. While their acquisition criteria and sweet spots vary somewhat, most institutional investors and fund managers today are still looking for Class A, dominant grocery-anchored shopping centers located in gateway markets. At the height of the commercial real estate market in 2007, these centers were trading at very low cap rates, and we are seeing those pricing levels once again in 2013 for true institutional-quality retail centers. The recent sale of a 100,000-square-foot Whole Foods-anchored center in Pennsylvania is a great example. When this asset came on the market, demand was fierce and dozens of offers were received. The center ultimately traded far above the initial pricing expectations at a low 5 percent cap rate. When investors make the decision to “reach for a property” with very tight spreads, they need to be absolutely certain about the …

By Bob Kenyon It is an anniversary that many would like to forget: Ten years ago on Aug. 14, the massive Northeast Blackout left around 50 million people in the U.S. and Canada in the dark. As we think back to 2003, it is worth remembering that blackouts continue to pose significant operational challenges for real estate professionals here in the Midwest. Because, while the Northeast Blackout was particularly memorable for its size and scope, smaller local and regional outages remain a frequent source of damaging and costly business interruptions across the Midwest. While few of those outages make headlines, the numbers are startling. In 2012, there were 268 reported power outages in Michigan, Illinois and Wisconsin alone. And those outages come with a sizable price tag: power outages and interruptions cost the U.S. economy anywhere from $80 billion to $188 billion each year. The picture does not look much better when you break it down to the individual firm level. The Department of Energy reports that IT systems power interruptions result in around a third of companies losing between $20,000 and $500,000; a fifth losing between $500,000 and $2 million; and 15 percent facing losses that exceed $2 million. …

By Steven McCraney As we enter the second half of the year, there is good reason to be optimistic that the economic recovery is gaining momentum. Rents are stabilizing, property values are strengthening and investment and construction are on the rise. These and other positive signs have boosted Central Florida's industrial real estate market. Several factors are at work. First, the Orlando area is attractive to foreign capital. In February, Siemens Energy Inc. announced it would invest $7 million in a 40,000-square-foot wind turbine training center near Orlando International Airport. The region is also a popular destination for international home hunters, according to online real estate marketing tools provider Point2. Second, there is an abundance of capital in the market searching for yield, despite the volatility of the commercial mortgage-backed securities market evidenced by the widening spreads during the past two months. We consistently read that billions of dollars are available from life insurance companies, private equity, REITs, pension funds and other traditional sources to fund properties in primary and secondary markets across all property types. It’s true that the market still holds few opportunities because there has been little construction and sales of opportunistic properties have been infrequent in …

Although the unemployment rate in July fell two-tenths of a percentage point to 7.4 percent, the lowest in four years, the 162,000 increase in total nonfarm payroll employment left some of the leading real estate economists unimpressed. Adding to the partly cloudy outlook, the U.S. Bureau of Labor Statistics (BLS) revised the total employment gains for May and June, resulting in 26,000 fewer jobs created than previously believed. Furthermore, the labor force participation rate fell slightly from 63.5 percent in June to 63.4 in July. To gain a better understanding of the impact of the jobs report on commercial real estate, REBusinessOnline.com interviewed three real estate economists – Bob Bach of Newmark Grubb Knight Frank, Rajeev Dhawan of Georgia State University and Ryan Severino of Reis. Unemployment Rates: A Red Herring None of the three seasoned economists put much stock in the unemployment number, which, while lower than it has been in recent memory, is largely offset by the decrease in the labor force participation rate. “Let me put it this way: The unemployment rate is not the right thing to look at for the health of a market these days. End of the story,” says Dhawan. “To know how …

By John McCurdy WASHINGTON, D.C. — The decline in the Architecture Billings Index (ABI) in April — the first in 10 months — appears to have been a blip on the radar. The American Institute of Architects (AIA) reported June’s score was 51.6, slightly down from May’s mark of 52.9, but still showing increasing demand for design services. A number greater than 50 reflects an increase in billings, while a score lower reflects a decrease, according to the AIA. Widely considered a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12 month lag time between architecture billings and construction spending. “With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” says Kermit Baker, chief economist for the AIA. The new projects inquiry index for June, 62.6, was a significant increase from that of May, 59.1.The ABI also includes more specific figures breaking down the growth, these three-month moving averages as opposed to monthly figures. Among the different property types monitored, commercial/industrial posted the highest score with 54.7. Multifamily residential was not far behind at 54.0, mixed practice scored 52.4, and institutional scored 51.8. As for the …

By John McCurdy WASHINGTON, D.C. — The decline in the Architecture Billings Index (ABI) in April — the first in 10 months — appears to have been a blip on the radar. The American Institute of Architects (AIA) reported June’s score was 51.6, slightly down from May’s mark of 52.9, but still showing increasing demand for design services. A number greater than 50 reflects an increase in billings, while a score lower reflects a decrease, according to the AIA. Widely considered a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12 month lag time between architecture billings and construction spending. “With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” says Kermit Baker, chief economist for the AIA. The new projects inquiry index for June, 62.6, was a significant increase from that of May, 59.1.The ABI also includes more specific figures breaking down the growth, these three-month moving averages as opposed to monthly figures. Among the different property types monitored, commercial/industrial posted the highest score with 54.7. Multifamily residential was not far behind at 54.0, mixed practice scored 52.4, and institutional scored 51.8. As for the …

By Ann Hambly As a CMBS borrower advocate, I am frequently asked if the worst is behind us as far as CMBS defaults are concerned. Defaults have leveled off while property values have started to increase, so at first blush it does appear that the worst is over. But is that really the case? What follows are 10 key facts that I want to share with you that will enable you to draw your own conclusion. Fact No. 1: Of the approximate $3 trillion of commercial real estate debt, CMBS accounts for approximately 25 percent of that total, or $740 billion. Fact No. 2: CMBS defaults reached an all-time high of approximately $63 billion in May 2012 and have since receded to just under $50 billion. The reason the total dollar amount of delinquent loans does not continue to increase is that CMBS defaults are being resolved at approximately the same pace as new defaults are occurring. Fact No. 3: More than 88 percent of the defaulted CMBS loans were originated from 2005-2008 with over 76 percent of them originated in the years 2005-2007. The biggest reason for CMBS loans defaulting is not the geographical location of the property, property …